How to Capture Google's Volatility -- and Profit

NEW YORK (TheStreet) -- Yes, capturing Google's (GOOG) (GOOGL) volatility is possible. It just requires striking when the time is right according to technical indicators.

Google is a momentum stock whose parabolic bubble popped after setting a split-adjusted all-time intraday high at $615.04 on Feb. 26. After breaking below its 50-day simple moving average on March 24, the downside for the stock gained negative momentum. It traded as low as $530.53 on April 7, for a high-to-low decline of 13.7%.

This wide trading range pre-earnings is reason enough for investors to attempt to capture a portion of this volatile range, both before and after Google reported their quarterly results.

On April 14, I wrote "Google Wants to Follow You Around the Mall," which included a pre-earnings profile for the stock. Investors who were betting on a positive reaction to earnings could have bought the stock at this week's value level at $536.08 on April 15, as Google traded as low as $530.64 that day.

The reason for buying at $536.08 was to capture the upside to our quarterly risky level at $562.40. That risky level was tested before the earnings release on Wednesday. Capturing this 4.9% before taking the post-earnings risk was the prudent strategy based upon our "buy-and-trade" levels.

Google reported earnings per share of $6.27, but missed analysts' estimates by 14 cents, with a miss on the revenue line. The stock plunged to as low as $524.89 after the closing bell. Investors interested in buying weakness had the opportunity to begin to buy at the weekly value level at $536.08.

Capturing volatility is best accomplished using GTC (good until cancelled) limit orders to buy weakness to a value level and to sell strength to a risky level.

The daily chart for Google is neutral, with the stock above its 200-day simple moving average at $514.75. It's below its 21-day and 50-day SMAs at $561.85 and $584.84. The daily slow stochastic, our measure of short-term momentum, is rising. That indicates that the stock should stay above its 2014 low at $530.53.

The weekly chart for Google stays negative with a close today below its five-week modified moving average at $564.36. The 200-week is currently at $356.33.

Investors should continue to attempt to capture volatility using a GTC limit order to buy weakness to an annual value level at $522.17, and to use a GTC limit order to sell strength to the quarterly risky level at $562.40.

A lower annual value level is at $489.53, with a monthly risky level at $664.16.

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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